Will Sui's (SUI) new approach help it become one of the leading blockchains?
Ethereum, now the world's largest smart contract platform, has been a tremendous success, but it has also revealed severe problems with the scalability and performance of early blockchain networks.
These problems have become one of the main reasons for the blockchain race, with creators seeking to introduce next-generation, high-performance decentralized platforms like Sui.
What is Sui?
Sui is a productive and scalable first-level blockchain based on Proof-of-Stake consensus. The blockchain provides high-speed and instant transaction completion and is focused on the decentralized finance (DeFi) and blockchain gaming (GameFi) sectors.
The Sui blockchain was developed by Mysten Labs, founded in 2022 after the dissolution of the Diem Association, which worked from 2018 on the now-popular Diem project, formerly known as Libra. Former Meta (Facebook) employees founded Sui. After the closure of the Diem Association, the Diem development team split into two groups: the first started working on the blockchain project Aptos and the second on Sui. Both teams used the developments to be incorporated into Diem's technology.
The Sui test network was launched in August 2022, and in May of the following year the team launched the leading network (mainnet) and held a tokensale on the CoinList exchange, which could be accessed simply by joining the project's Discord server.
Sui has attracted an impressive amount of investment not only by the standards of the crypto market: with a valuation of $2 billion, the team managed to raise about $350 million during two rounds of funding from such major funds as:
- A16z,
- Binance Labs,
- Circle,
- Coinbase Ventures,
- Jump Crypto,
- Apollo and others.
How does Sui work?
Sui smart contracts are created in the Move programming language developed by the Meta team for the Diem project based on the popular Rust language. Aptos developers used the same language to write smart contracts.
The peculiarity of the Sui blockchain is its ability to process transactions in parallel with each other, which provides the possibility of horizontal scaling of the network. Instead of having all validators in the network validate every transaction, Sui takes a different approach: validating transactions individually. Sui validators do not check the entire chain of transactions, but only the part allocated to them, and then compare it with the rest of the fragments.
As claimed by the developers, the Sui blockchain has a throughput of up to 15,000 transactions per second (TPS). However, Sui Explorer data shows that over the last 30 days, the peak throughput was only 5,969 TPS, but this is due to insufficiently high activity, as the daily number of active users is still only ~17,000. In comparison, Ethereum has over 362,000 — 21 times more than Sui.
Sui ecosystem
The Sui ecosystem is isolated from EVM-enabled Web3 applications like Uniswap or Sushi. Still, it has major DeFi protocols, such as the decentralized exchange Cetus and the credit protocols NAVI Protocol and OmniBTC.
Sui does not yet have an ecosystem as developed as Solana, Avalanche, or Base. Still, it already ranks 16th among all blockchains in terms of blockchain assets (TVL) in DeFi protocols, which exceeds $220 million — more than MultiversX and ZkSync.
Sui token
SUI is the blockchain platform's primary token, used to pay commissions and out staking rewards. SUI is also one of the leading digital assets of the entire DeFi ecosystem built on the Sui blockchain, giving users access to all the features of the decentralized protocols:
- lending,
- trading,
- farming,
- liquidity mining,
- NFT trading, and more.
The maximum issuance of SUI tokens is 10 billion. About 1.1 billion SUIs are circulating in the market, about 11% of the total issuance. The remainder is generated through the staking and unlocking of tokens by investors, the Mysten Labs fund, early adopters of the Sui ecosystem, and the community.
SUI token ranks 71st in CoinMarketCap's ranking of all cryptocurrencies in capitalization, which exceeds $843 million. After listing on exchanges in May 2023, capitalization fell from $725 million to a low of $317 million in October but has grown more than 2.5 times amid overall crypto market growth.
SUI's price hit an all-time high (ATH) almost immediately after listing in May at $1.72. Then, the rate gradually declined, reaching a low in October 2023 at $0.36 and now at $0.76. The SUI token is traded on well-known and significant exchanges such as Binance, Coinbase, ByBit, OKX, and HTX.
SUI problems
One of the significant challenges of the Sui blockchain is isolation. At the centre of the DeFi ecosystem is Ethereum, around which many DeFi protocols and blockchains are built. The Sui team has taken a different path, and now, instead of getting a share of the EVM ecosystem, it will have to compete with serious players like Arbitrum, Polygon, BNB Chain, Tron and others.
The second major problem with Sui is that most of the tokens are concentrated in the hands of project team members. According to the Token Unlocks service, more than half of SUI tokens remain untraceable, and the team can do anything with them. Users have noted that unauthorized token sales have already been observed.
In addition, Sui has a token unlocking system that occurs more often than once a month. The closest SUI token unlocks will occur at the end of January 2024. Unlocks may put additional pressure on the token rate.
Despite the support of significant funds and the availability of innovative technologies, the prospects for Sui remain controversial, as this blockchain does not currently have any particular advantages over the ecosystem built around Ethereum.